Airlines & Airports
Can Hainan Air Bring Lower Fares and Better Service to the US-China Market?
Photo courtesy of the China National Tourist Organization
HNA Group, the parent company of Hainan Airlines, has been intent on entering the transpacific marketplace over the past few years. Hainan, which is mainland China’s best airline according to Skytrax, has service to Seattle, San Jose, Los Angeles, Chicago and Boston. The carrier also flies to Calgary and Toronto.
Next year, Hainan plans to link two secondary Chinese cities, Chengdu and Chongqing, both in Southwestern China, with New York City. It has also been eyeing international flights from the coastal city of Tianjin, where one of its largest subsidiaries, Tianjin Air, is located.
New long-haul low-cost carrier connecting U.S. and China
Now, HNA’s low-cost long-haul brand, Lucky Air, is planning to start flights to Los Angeles. Based in Kunming, the long haul airline is a part of the new U-Fly Alliance of low-cost carriers. This will work for it in a couple of ways. First, U-Fly's regional low-cost carriers can act as feeders and offer connections for Lucky Air’s transpacific flights. Second, it will mean that HNA can enter the long-haul low-cost model, which has proven very successful in the transatlantic market but has yet to take off in the Asia Pacific region.
Thanks to an advertising campaign touting its connectivity and quality, more travelers in the United States are aware of Hainan Airlines. If Lucky Air can bring the kind of low fares that Norwegian and Wow Air have brought to the transatlantic market, it should earn plenty of media buzz as well.
Read More: Is United's Transpacific Bet Paying Off?
From underdog to favorite
China’s largest airlines are owned by the government. China Southern, China Eastern and Air China are often given preferential treatment when it comes to international routes. This is why Hainan, which is privately owned, flies to secondary cities like Calgary and San Jose and why it is developing Chinese destinations besides Beijing and Shanghai.
With low-cost connections from regional affiliates, flying into a secondary city like Chongqing or Tianjin might not be a big deal for Hainan fliers from the U.S.
Cheaper China flights for Americans?
Actually, one of America’s largest carriers is adopting a similar strategy. United Airlines has opted to expand to Chinese cities like Xian and Hangzhou rather than putting all their bets on the hubs of Shanghai and Beijing. T
Both Hainan and United's routes will probably be favored by business travelers (Hangzhou is a tech hub, for example) and by overseas Chinese traveling between the U.S. and the PRC. Hainan’s ad campaign in the U.S. certainly seems geared towards business travelers. The Lucky Air flights, however, will be of interest to tourists. Kunming is actually a popular destination for budget travelers, so the new flights could open up the inland region of China to more American tourists.
HNA is also expanding through acquisitions. It was rumored to be interested in bidding for Virgin America, but ultimately decided not to. It has already acquired one-fourth of Brazilian carrier Azul and 13 percent of Virgin Australia (in a deal that is still pending).
So HNA seems intent on going global and, as far as expansion and advertising, it seems to be in pole position in the China-U.S. market.
One final piece of evidence that shows how much HNA Group is betting on success in the U.S.: One of the airline’s founders, Chen Guoqing, reportedly bought a penthouse condo in New York City last year. The price tag: more than $47 million.
More by Josh Lew
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